Nobel Laureate Krugman Calls for Rethink on Free Trade as Western Economists Reassess Views

Some argue tariffs are needed to counter China

In South America, once hostile to market economics

Milei-style calls for a smaller state are spreading

Countries’ changing views of the free-market model are reshaping the thinking of economists in both advanced and developing economies. Confidence in free-market capitalism is wavering among some Western economists, while support for the model is growing in developing nations.

Paul Krugman, the Nobel Prize-winning economist and a professor at the City University of New York, is one prominent example. In a recent Bloomberg TV appearance, he said the US-Mexico-Canada Agreement should be reconsidered in light of China’s influence. “I’m not saying we should impose tariffs on everything, but a much more interventionist stance has become really hard to avoid.”

Soumaya Keynes, a Financial Times columnist, and Chad Bown, a senior fellow at the Peterson Institute for International Economics, made a similar case in their book, “How to Survive a Trade War.” Citing the decline of Europe’s auto industry, they argued that tariffs should be applied to products where import dependence is rising sharply in order to respond to Chinese coercion.

Neither rejects the idea that free economic activity produces the best outcomes. But they put more emphasis on the reality that governments must account for the “borders” that shape economies and industries.

The opposite trend is emerging in developing countries, where dependency theory once dominated and cast the free-market system as a Western tool for exploiting the developing world. Argentine President Javier Milei has championed “Milei-ism,” a push to drastically reduce the role of the state. He has described himself as a libertarian close to the Austrian School and has gone so far as to call for abolishing the central bank.

Milei-ism, which stresses a break from traditional left-wing populism, is spreading across South America. Like-minded right-wing politicians are gaining support and winning office in countries including Paraguay and Bolivia.

Brian Winter, editor-in-chief of Americas Quarterly, wrote in Foreign Affairs that Latin America’s most emblematic leader is shifting from the left-wing revolutionary to the right.

Lee Sang-eun, Washington correspondent, Hankyung.com selee@hankyung.com